A combined U.S. Steel and Cleveland-Cliffs also would own 100 percent of domestic iron ore reserves, raising risk of intervention by antitrust regulators.
The forces at play are the result of decades of shocks to American basic steel makers — which make metal from iron ore in blast furnaces — from foreign competition, cheaper and more efficient furnaces that remelt scrap into steel, and other materials such as aluminum and composites.
And it’s U.S. Steel’s deft repositioning in recent years that made it an attractive target. CEO David Burritt has diversified, investing in the more efficient and lower-emission scrap-melting furnaces. This comes as steel demand is expected to rise and as automakers and other manufacturers look to reduce carbon emissions in their supply chains.
The implications of a potential U.S. Steel sale go even further. The top 10 list of global steel makers is dominated by Chinese operations. A merger of U.S. Steel and Cleveland-Cliffs would put an American firm into or close to the top 10, according to 2022 World Steel Association tonnage figures.
There is a national security interest in having large, globally competitive steel producers in the U.S. While a merger poses the potential of higher steel prices, the gravitational pull of market forces and a national security interest is strong.